Bill submission shows Edwards on the ropes
No doubt as an Army officer Louisiana Democrat Gov. John Bel Edwards loathed ordering his men to retreat. He must not be feeling all that great today.
Today, Democrat state Rep. Sam Jones filed HB 638, which would postpone the Jun. 30, 2018 sunset date for the one cent increase in sales taxes enacted just over a year ago for five years. Jones, who shared a desk with Edwards for eight years in the Legislature, alleges he received no marching orders from the Governor’s Office to do this but did it now because bill filing ends today.
We must take that assertion with a grain of salt. Dozens of bills already existed addressing sales tax, many by Democrats, who would not have minded an amendment like this if and when the need arose. Nor must a commander give a direct order for his subordinates to intuit a course of action. No; this comes precisely because Edwards has realized the need for it has arisen, in a form most easily controlled by him.
The need for it has arisen because Edwards knows the front end of his tax-and-spend agenda is going nowhere, and he needs to salvage the back side of it. His plan has three components: (1) an essentially revenue-neutral trade of lower individual income tax rates for eliminating the federal income tax deduction, (2) making permanent reductions in or eliminating tax exceptions now while starting a slow process of sloughing off the corporate franchise tax over an extended period, and (3) swapping out the fifth cent of sales tax for a gross receipts tax (which he calls a “Corporate Activity Tax”) on most business entities.
It all hinges on the fifth penny, so to abandon that means he has lost faith that the CAT will make it into law. He has plenty of reason to think so; when your chief bootlicker Republican Sen. Pres. John Alario expresses doubt about your legislation, you know it’s in trouble. Even more telling: Jones also carries HB 628, the CAT legislation.
To scramble for a contingency plan strikes a potentially fatal blow not only to any claim that he brought tax reform to Louisiana but also to his reelection chances. Basically, in a center-right state with Democrats controlling no other statewide offices or elected boards, Edwards’ only hope to win again in 2019 lies in his ability to manage crises and to demonstrate he at least partially fixed the state’s convoluted fiscal structure. As he begins to lose credibility on the first count with a recovery program to address historic floods in the state last year dragging, he really needs a victory on the second.
For months Edwards has prattled on about how corporations must pay their “fair share” of taxes, so to fail with the CAT would throw a lot of cold water on perceptions of his ability to govern. But to settle for continuation of the sales tax would cause him absolute humiliation, given the belief (although not factually correct) that having people pay the same level of taxation on largely non-essential items somehow disproportionately negatively impacts lower-income households. In essence, he would ratify continuation of an “unfair” tax.
That would harm Edwards little with his a significant portion of his base, whose extensive government benefits they receive (for the modal family in Louisiana, an average of over $26,000 annually in 2013) remain untaxed as well as their purchases of unprepared food, drugs, and utilities. But others who could support him from the lower-middle and middle classes will object to a tax that supposedly hits them harder than those families better off (because even though higher-income households would pay more, often much more, in absolute terms, relatively speaking they would pay less).
And if forced to head in the direction of retaining the sales tax increase to pay for big government, he’ll write off support from that nontrivial part of this segment of the electorate, making his reelection nearly impossible. It even could get worse: if he does move to this fallback position and the Republican-controlled Legislature defeats that, then he’ll be on the hook for supporting a measure viewed negatively by those necessary for his reelection yet failing to bring the benefits of the extra revenues state government could deliver to them and other client groups in his coalition.
Having to make this move at this time with Edwards’ implicit endorsement indicates his governorship has come to a major inflection point. And that the opportunity for him to secure reelection continues to wither away.
Posted by Jeff Sadow at 12:50